LEGRAND
STATUTORY AUDITORS’ REPORT
PricewaterhouseCoopers Audit
63, rue de Villiers
92208 Neuilly-sur-Seine cedex
Deloitte & Associés
185, avenue Charles-de-Gaulle
92200 Neuilly-sur-Seine
Statutory Auditors’ Report on the Consolidated Financial Statements.
For the Year ended December 31, 2013
This is a free translation into English of the Statutory Auditors’ report on the consolidated financial statements issued in French and is provided solely for the convenience of English speaking users. The Statutory Auditors’ report includes information specifically required by French law in such reports, whether modified or not. This information presented below is the audit opinion on the consolidated financial statements and includes an explanatory paragraph discussing the auditors’ assessments of certain significant accounting and auditing matters. These assessments were considered for the purpose of issuing an audit opinion on the consolidated financial statements taken as a whole and not to provide separate assurance on individual account balances, transactions or disclosures.
This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.
To the Shareholders
LEGRAND
Société anonyme
128, avenue du Maréchal de Lattre de Tassigny
87000 Limoges
In compliance with the assignment entrusted to us by your Annual General Meetings,
we
hereby report to you for the year ended December 31, 2013 on:
the audit of the accompanying consolidated financial statements of Legrand;
the justification of our assessments;
the specific verification required by law.
The consolidated financial statements have been approved by the Board of Directors. Our
role is to express an opinion on these consolidated financial statements based on our audit.
I - Opinion on the consolidated financial statements
LEGRAND
Statutory Auditors’ Report on the Consolidated Financial Statements for the Year ended December 31, 2013
2 / 2
In our opinion, the consolidated financial statements give a true and fair view of the assets
and liabilities and of the financial position of the Group as at December 31, 2013 and of the
results of its operations for the year then ended in accordance with IFRSs as adopted by the
European Union.
II - Justification of our assessments
In accordance with the requirements of article L.823-9 of French Company Law (Code de
commerce) relating to the justification of our assessments, we bring to your attention the
following matters:
Goodwill
and
intangible
assets
represent
respectively
€ 2.411,7 million and
€ 1.821,1 million of the total consolidated assets of your Company and have been recorded
as a result of the acquisition of Legrand France in 2002 and of other subsidiaries
since 2005. As mentioned in notes 2.6 and 2.7 of the consolidated financial statements,
your Company performs, each year, an impairment test of the value of goodwill and
intangible assets with indefinite useful lives; and assesses whether changes or
circumstances relating to long term assets, which could lead to an impairment loss, have
occurred during the year. We have reviewed the methods by which the impairment tests are
performed as well as the projected cash flow and assumptions used for these impairment
tests and verified that information disclosed in notes 4 and 5 of the consolidated financial
statements is appropriate.
These assessments were made as part of our audit approach of the consolidated financial
statements taken as a whole, and therefore contributed to the opinion we formed which is
expressed in the first part of this report.
III - Specific verification
As required by law, we also verified the information presented in the Group management
report in accordance with professional standards applicable in France.
We have no matters to report regarding its fair presentation and consistency with the
consolidated financial statements.
Neuilly-sur-Seine, February 12, 2014
The Statutory Auditors
PricewaterhouseCoopers Audit
Deloitte & Associés
LEGRAND
CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2013
CONTENTS
Consolidated Statement of Income 2
Consolidated Balance Sheet 3
Consolidated Statement of Cash Flows 5
Consolidated Statement of Changes in Equity 6
Consolidated Statement of Income
Legrand
12 months ended December 31,
(in € millions) 2013 2012
Revenue (Note 2.11) 4,460.4 4,466.7
Operating expenses
Cost of sales (2,156.6) (2,157.8)
Administrative and selling expenses (1,184.4) (1,197.1)
Research and development costs (197.8) (197.0)
Other operating income (expense) (Note 18.2) (72.2) (66.8)
Operating profit (Note 18) 849.4 848.0
Financial expense (Note 19.2) (87.7) (102.5)
Financial income (Note 19.2) 6.9 20.8
Exchange gains (losses) (Note 19.1) (1.8) (11.7)
Total net financial expense (82.6) (93.4)
Profit before tax 766.8 754.6
Income tax expense (Note 20) (233.5) (247.6)
Profit for the period 533.3 507.0
Attributable to:
– Legrand 530.5 505.6
– Minority interests 2.8 1.4
Basic earnings per share (euros) (Notes 2.18 and 11.2) 2.002 1.920
Diluted earnings per share (euros) (Notes 2.18 and 11.2) 1.973 1.901
Statement of Comprehensive Income
12 months ended December 31,
(in € millions) 2013 2012
Profit for the period 533.3 507.0
Items that may be reclassified subsequently to profit or loss
Translation reserves (Notes 2.3 and 13.2) (194.1) (35.9)
Income tax relating to components of other comprehensive
income (3.1) (0.8)
Items that will not be reclassified to profit or loss
Actuarial gains and losses (Notes 2.16 and 16) 14.7 (23.8)
Deferred taxes on actuarial gains and losses (4.9) 7.2
Comprehensive income for the period 345.9 453.7
Attributable to:
– Legrand 344.7 452.0
– Minority interests 1.2 1.7
Consolidated Balance Sheet Legrand December 31, December 31, (in € millions) 2013 2012 ASSETS Current assets
Cash and cash equivalents (Notes 2.4 and 10) 602.8 494.3
Marketable securities 3.0 0.0
Income tax receivables 45.9 54.2
Trade receivables (Notes 2.5 and 8) 474.3 490.6
Other current assets (Note 9) 138.5 140.5
Inventories (Notes 2.9 and 7) 620.9 599.8
Other current financial assets (Note 22) 0.0 0.0
Total current assets 1,885.4 1,779.4
Non-current assets
Intangible assets (Notes 2.6 and 4) 1,821.1 1,823.5
Goodwill (Notes 2.7 and 5) 2,411.7 2,455.2
Property, plant and equipment (Notes 2.8 and 6) 560.6 576.6
Other investments 0.8 0.7
Deferred tax assets (Notes 2.10 and 20) 94.5 93.8
Other non-current assets 2.5 2.3
Total non-current assets 4,891.2 4,952.1
Total Assets 6,776.6 6,731.5
Legrand
December 31, December 31,
(in € millions) 2013 2012
LIABILITIES AND EQUITY Current liabilities
Short-term borrowings (Notes 2.19 and 14.2) 86.9 80.1
Income tax payable 24.5 16.6
Trade payables 468.8 440.7
Short-term provisions (Note 15) 99.9 108.0
Other current liabilities (Note 17) 441.8 478.5
Other current financial liabilities (Note 22) 0.1 0.5
Total current liabilities 1,122.0 1,124.4
Non-current liabilities
Deferred tax liabilities (Notes 2.10 and 20) 661.8 648.8
Long-term provisions (Note 15 and 16.2) 100.4 104.9
Other non-current liabilities 0.4 0.5
Provisions for pensions and other post-employment benefits
(Notes 2.16 and 16.1) 156.7 165.6
Long-term borrowings (Notes 2.19 and 14.1) 1,486.6 1,496.7
Total non-current liabilities 2,405.9 2,416.5
Equity
Share capital (Note 11) 1,062.4 1,057.5
Retained earnings (Note 13.1) 2,575.8 2,335.9
Translation reserves (Note 13.2) (400.8) (208.3)
Equity attributable to equity holders of Legrand 3,237.4 3,185.1
Minority interests 11.3 5.5
Total equity 3,248.7 3,190.6
Total Liabilities and Equity 6,776.6 6,731.5
Consolidated Statement of Cash Flows
Legrand
12 months ended December 31,
(in € millions) 2013 2012
Profit for the period 533.3 507.0
Reconciliation of profit for the period to net cash provided by/(used in) operating activities:
– Depreciation expense (Note 18.1) 101.5 105.2
– Amortization expense (Note 18.1) 39.2 36.9
– Amortization of development costs (Note 18.1) 27.7 24.2
– Amortization of financial expense 1.9 2.2
– Impairment of goodwill (Notes 5 and 18.2) 0.0 0.0
– Changes in deferred taxes (10.6) 10.8
– Changes in other non-current assets and liabilities (Notes 15 and 16) 31.8 32.2
– Exchange (gains)/losses, net (4.9) 8.8
– Other adjustments 0.4 0.7
– (Gains)/losses on sales of assets, net (0.5) (2.5)
Changes in operating assets and liabilities:
– Inventories (Note 7) (49.9) 15.8
– Trade receivables (Note 8) (22.9) 65.0
– Trade payables 30.3 (1.3)
– Other operating assets and liabilities 14.6 (65.8)
Net cash provided by/(used in) operating activities 691.9 739.2
– Net proceeds from sales of fixed and financial assets 4.3 8.4
– Capital expenditure (Notes 4 and 6) (103.9) (92.5)
– Capitalized development costs (29.1) (28.1)
– Changes in non-current financial assets and liabilities (2.7) (0.2)
– Acquisitions of subsidiaries, net of cash acquired (Note 3) (131.7) (187.9)
Net cash provided by/(used in) investing activities (263.1) (300.3)
– Proceeds from issues of share capital and premium (Note 11) 23.4 21.9
– Net sales (buybacks) of treasury shares and transactions under the
liquidity contract (Note 11) (30.1) (6.9)
– Dividends paid to equity holders of Legrand* (265.1) (245.0)
– Dividends paid by Legrand subsidiaries (3.8) (1.3)
– Proceeds from new borrowings and drawdowns (Note 14) 2.4 414.6
– Repayment of borrowings (Note 14) (16.5) (514.9)
– Debt issuance costs 0.0 (3.6)
– Increase (reduction) in bank overdrafts (3.3) (82.9)
– Acquisitions of ownership interests with no gain of control (Note 3) (1.7) (8.1)
Net cash provided by/(used in) financing activities (294.7) (426.2)
Effect of exchange rate changes on cash and cash equivalents (25.6) (6.7)
Increase (decrease) in cash and cash equivalents 108.5 6.0
Cash and cash equivalents at the beginning of the period 494.3 488.3
Cash and cash equivalents at the end of the period (Note 10) 602.8 494.3 Items included in cash flows:
– Free cash flow** (Note 24) 563.2 627.0
– Interest paid during the period 69.6 67.1
– Income taxes paid during the period 196.8 268.2
*see consolidated statement of changes in equity **normalized free cash flow is presented in Note 24
Consolidated Statement of Changes in Equity
Equity attributable to equity holders of Legrand Minority interests Total equity (in € millions) Share capital Retained earnings Translation reserves TOTAL As of December 31, 2011 1,053.6 2,064.3 (172.1) 2,945.8 3.4 2,949.2
Profit for the period 505.6 505.6 1.4 507.0
Other comprehensive income (17.4) (36.2) (53.6) 0.3 (53.3)
Total comprehensive income 488.2 (36.2) 452.0 1.7 453.7
Dividends paid (245.0) (245.0) (1.3) (246.3)
Issues of share capital and premium 3.9 18.0 21.9 21.9
Net sales (buybacks) of treasury shares and
transactions under the liquidity contract (6.9) (6.9) (6.9)
Change in scope of consolidation** (12.2) (12.2) 1.7 (10.5)
Current taxes on share buybacks (0.5) (0.5) (0.5)
Stock options 30.0 30.0 30.0
As of December 31, 2012 1,057.5 2,335.9 (208.3) 3,185.1 5.5 3,190.6
Profit for the period 530.5 530.5 2.8 533.3
Other comprehensive income 6.7 (192.5) (185.8) (1.6) (187.4)
Total comprehensive income 537.2 (192.5) 344.7 1.2 345.9
IAS 19 amendments* (5.3) (5.3) (5.3)
Dividends paid (265.1) (265.1) (3.8) (268.9)
Issues of share capital and premium (Note
11) 4.9 18.5 23.4 23.4
Net sales (buybacks) of treasury shares and transactions under the liquidity contract
(Note 11) (30.1) (30.1) (30.1)
Change in scope of consolidation** (35.3) (35.3) 8.4 (26.9)
Current taxes on share buybacks (0.4) (0.4) (0.4)
Stock options (Note 12.1) 20.4 20.4 20.4
As of December 31, 2013 1,062.4 2,575.8 (400.8) 3,237.4 11.3 3,248.7
* see Note 2.1.3
**changes in scope of consolidation correspond mainly to acquisitions of additional shares in companies already consolidated in the Group’s financial statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Detailed table of contents
Note 1 - General information 8
Note 2 - Accounting policies 8
Note 3 - Changes in the scope of consolidation 23
Note 4 - Intangible assets (Note 2.6) 24
Note 5 - Goodwill (Note 2.7) 26
Note 6 - Property, plant and equipment (Note 2.8) 29
Note 7 - Inventories (Note 2.9) 31
Note 8 - Trade receivables (Note 2.5) 31
Note 9 - Other current assets 32
Note 10 - Cash and cash equivalents (Note 2.4) 32
Note 11 - Share capital and earnings per share (Note 2.18) 33
Note 12 - Stock option plans, performance share plans and employee profit-sharing (Note 2.14) 35
Note 13 - Retained earnings and translation reserves 38
Note 14 - Long-term and short-term borrowings (Note 2.19) 39
Note 15 - Provisions 42
Note 16 - Pensions and other post-employment defined benefit obligations (Note 2.16) 43
Note 17 - Other current liabilities 48
Note 18 - Analysis of certain expenses 49
Note 19 - Total net financial expense 49
Note 20 - Income tax expense (current and deferred) (Note 2.10) 50
Note 21 - Off-balance sheet commitments and contingent liabilities 52
Note 22 - Financial instruments and management of financial risks 53
Note 23 - Information relating to corporate officers 60
Note 24 - Information by geographical segment (Note 2.17) 61
Note 25 - Quarterly data – unaudited 63
Note 26 - List of consolidated companies 66
Note 1 - General information
Legrand (“the Company”) along with its subsidiaries (together “Legrand” or “the Group”) is the global specialist in electrical and digital building infrastructures.
The Group has manufacturing and/or distribution subsidiaries and offices in more than 80 countries, and sells its products in about 180 countries. Its key markets are France (21%), Italy (11%), the United States and Canada (17%), the Rest of Europe (18%) and the Rest of the World (33%), with a steadily rising contribution from the new economies (close to 40% of the consolidated total in 2013).
The Company is a société anonyme (public limited company) incorporated and domiciled in France. Its registered office is located at 128, avenue du Maréchal de Lattre de Tassigny, 87000 Limoges (France).
The 2012 Registration Document was filed with the AMF on March 28, 2013 under no. D. 13-0240.
The consolidated financial statements were approved by the Board of Directors on February 12, 2014.
All amounts are presented in millions of euros unless otherwise specified. Some totals may include rounding differences.
Note 2 - Accounting policies
As a company incorporated in France, Legrand is governed by French company laws, including the provisions of the Commercial Code.
The consolidated financial statements cover the 12 months ended December 31, 2013. They have been prepared in accordance with the International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretation Committee (IFRIC) interpretations adopted by the European Union and applicable or authorized for early adoption from January 1, 2013.
None of the IFRSs issued by the International Accounting Standards Board (IASB) that have not been adopted for use in the European Union are applicable to the Group.
The IFRSs adopted by the European Union as of December 31, 2013 can be downloaded from the “IAS/IFRS Standards and Interpretations” page of the European Commission’s website:
http://ec.europa.eu/internal_market/accounting/ias/index_en.htm.
The preparation of financial statements in accordance with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgment in applying the Company’s accounting policies. The areas involving a specific degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 2.21.
2.1 New standards, amendments and interpretations
2.1.1 New standards, amendments and interpretations with mandatory application from January 1, 2013, and applied by the Group in early 2012
Amendments to IAS 1 - Presentation of items of other comprehensive income.
This amendment was published by IASB in June 2011 and has been applied by the Group in early 2012.
This amendment requires separate subtotals for:
• elements of « comprehensive income for the period » that could be reclassified ultimately into “net income” in the consolidated statement of income showing separately the related taxes, and
• elements of « comprehensive income for the period » that cannot be reclassified into net income, showing separately the related taxes.
2.1.2 New standards, amendments and interpretations applied by the Group after January 1, 2013 that have no impact on its financial statements
IFRS 13 – Fair Value Measurement
In May 2011, IASB issued guidance for measuring fair value and for the related disclosures required in the notes to financial statements. The guidance is designed to establish a single framework for fair value measurement under IASs and IFRSs.
Amendments to IAS 12 – Deferred Tax: Recovery of Underlying Assets
In December 2010, the IASB issued amendments to IAS 12 entitled Deferred Tax: Recovery of Underlying Assets. The amendments introduce a presumption that the carrying amount of an asset is fully recovered upon its sale, unless it is recovered otherwise.
Amendments to IFRS 7 – Disclosures: Offsetting Financial Assets and Financial Liabilities
In December 2011, the IASB issued additional provisions on the information to be provided in the notes to the consolidated financial statements regarding agreements offsetting financial assets and financial liabilities.
2.1.3 New standards, amendments and interpretations applied by the Group after January 1, 2013 that have an impact on its financial statements
Amendments to IAS 19 – Employee Benefits
The revised standard, which applies retrospectively, has had the following impacts:
• The Group’s commitments to its employees are fully recognized at the end of each financial period, as it is no longer possible to amortize past service costs resulting from plan amendments over the remaining work life of the employees concerned;
• Unamortized past service costs were accounted for in retained earnings, for their value net of tax during the period of application of the revised standard;
• The effects of any changes in defined benefit plans after January 1, 2012 are recognized directly in income statement in operating profit in the period in which they occur;
• The expected return on plan assets is set as being equal to the discount rate used to determine the present value of the projected benefit obligations.
The different impacts of the revised standard in 2012 can be summarized as follows:
(in € millions)
As of January 1, 2012
As of December 31, 2012
Net increase in pension liability (8.9) (8.0)
Net increase in deferred tax assets 3.1 2.7
Net decrease in shareholders’ equity (5.8) (5.3)
Actuarial gains and losses - 1.0
Decrease in personnel costs - 0.9
Increase in financial expenses - (1.6)
Deferred tax income - 0.2
Decrease in net income - (0.5)
The impact of these adjustments are not material, therefore no restatements have been made to the 2012 balance sheet and income statement.
2.1.4 New standards, amendments and interpretations not applicable to the Group until future periods
Standards and interpretations adopted by the European Union
Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests
In May 2011, the IASB issued new standards – IFRS 10 – Consolidated Financial Statements, IFRS 11 – Joint Arrangements and IFRS 12 – Disclosure of Interests in Other Entities – as well as the resulting amendments to IAS 27, reissued as Separate Financial Statements, and IAS 28, reissued as Investments in Associates and Joint Ventures.
The new IFRS 11 – Joint Arrangements introduces new requirements in recognizing joint arrangements, with in particular the use of the equity method to account for joint ventures.
The new IFRS 12 – Disclosure of Interests in Other Entities integrates into a single standard the disclosures required for interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities.
These new standards are applicable to annual periods beginning on or after January 1, 2014. They are not expected to materially impact the consolidated financial statements, as the Group exercises exclusive control over all its consolidated subsidiaries.
These new standards will not be early applied.
Amendments to IAS 32 Financial Instruments – Disclosures: Offsetting Financial Assets and Financial Liabilities
In December 2011, the IASB published amendments to IAS 32 “Financial Instruments – Disclosures: Offsetting Financial Assets and Financial Liabilities” clarifying the rules for offsetting financial assets and liabilities.
The amendments to IAS 32 are applicable retrospectively and are effective for annual periods beginning on or after January 1, 2014. Their impact on the Group’s consolidated financial statements is not expected to be material.
Amendments to IAS 36 – Recoverable Amount Disclosures for Non-Financial Assets
In May 2013, the IASB published amendments to IAS 36 that require disclosure of the valuation techniques used, as well as of the key assumptions used in the current measurement and previous measurement of fair value when an impairment loss has been recognized (or reversed in the case of assets other than goodwill).
The amendments are applicable prospectively for annual periods beginning on or after January 1, 2014. Their impact on the Group’s consolidated financial statements is not expected to be material.
Amendment to IAS 39 – Novation of Derivatives and Continuation of Hedge Accounting
In June 2013, the IASB published an amendment to IAS 39 that allows hedge accounting to be continued in certain situations where a derivative is novated (i.e., the parties to a contract agree to replace their original contract with a new one).
The amendment is applicable for annual periods beginning on or after January 1, 2014. In accordance with IAS 8, it is applicable retrospectively. Its impact on the Group’s consolidated financial statements is not expected to be material.
Standards and interpretations not yet adopted by the European Union
IFRS 9 – Financial Instruments
an entity manages its financial instruments (its business model) and the contractual cash flow characteristics of the financial asset. The new standard also requires a single impairment method to be used, replacing the many different impairment methods in IAS 39.
In October 2010, the IASB issued additions to IFRS 9 – Financial Instruments for financial liability accounting. Under the new requirements, which concern the classification and measurement of financial liabilities, an entity choosing to measure a liability at fair value will present the portion of the change in its fair value due to changes in the entity’s own credit risk in the other comprehensive income (OCI) section of the income statement, rather than within profit and loss.
IFRS 9 and its amendments have not yet been adopted for use in the European Union.
IFRIC 21 – Levies
In May 2013, the IFRS Interpretation Committee issued IFRIC 21 – Levies which aims to clarify the trigger event for the provisioning for all taxes other than income taxes. This interpretation will modify existing practices for annual taxes whose payment is triggered, for an entity, by being in operations on a specified date or by achieving a certain level of activity.
IFRIC 21 is effective for annual periods beginning on or after 1 January 2014. Its impact should be recognized retrospectively in accordance with IAS 8.
IFRIC 21 has not yet been approved by European Union.
The Group is reviewing these standards, interpretations and amendments to determine their possible impact on the disclosures in the consolidated financial statements.
2.2 Basis of consolidation
Subsidiaries controlled by the Group are fully consolidated. Control is defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Subsidiaries are consolidated from the date when effective control is transferred to the Group. They are deconsolidated from the date on which control ceases.
Associates are entities over which the Group has significant influence but not control. Significant influence is generally considered to be exercised when the Group holds 20 to 50% of the voting rights. Investments in associates are initially recognized at cost and are subsequently accounted for by the equity method.
The Group does not hold interests accounted for under the equity method.
2.3 Foreign currency translation
Foreign currency transactions are translated into the functional currency using the exchange rate on the transaction date. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies using the exchange rate at the balance sheet date are recognized in the income statement under the heading “Exchange gains (losses)”.
Assets and liabilities of Group entities whose functional currency is different from the presentation currency are translated using the exchange rate at the balance sheet date. Statements of income are translated using the average exchange rate for the period. Gains or losses arising from the translation of the financial statements of foreign subsidiaries are recognized directly in equity, under “Translation reserves”, until the entities are sold or substantially liquidated.
A receivable from or payable to a foreign Group entity, whose settlement is not planned or likely to occur in the foreseeable future, is treated as part of the net investment in that entity. As a result, in compliance with IAS 21, translation gains and losses on such receivables or payables are recognized directly in equity, under “Translation reserves”.
2.4 Cash and cash equivalents
Cash and cash equivalents consist of cash, short-term deposits and all other financial assets with an original maturity of less than three months. The other financial assets maturing in less than three months are readily convertible to known amounts of cash and are not subject to any material risk of change in value. Marketable securities are not considered as cash equivalents.
Cash and cash equivalents that are unavailable in the short term for the Group correspond to the bank accounts of certain subsidiaries facing complex, short-term fund repatriation conditions due mainly to regulatory reasons.
Bank overdrafts are considered to be a form of financing and are therefore included in short-term borrowings.
2.5 Trade receiv ables
Trade receivables are initially recognized at fair value and are subsequently measured at amortized cost. A provision is recognized in the income statement when there is objective evidence of impairment such as:
• When a debtor has defaulted;
2.6 Intangible assets 2.6.1 Trademarks
Trademarks with finite useful lives are amortized:
• Over 10 years when management plans to gradually replace them by other major trademarks owned by the Group;
• Over 20 years when management plans to replace them by other major trademarks owned by the Group only over the long term or when, in the absence of such an intention, management considers that the trademarks may be threatened by a major competitor in the long term.
Amortization of trademarks is recognized in the income statement under “Administrative and selling expenses”.
Trademarks are classified as having an indefinite useful life when management believes they will contribute indefinitely to future consolidated cash flows because it plans to continue using them indefinitely. Useful lives are reviewed at regular intervals, leading in some cases to trademarks classified as having an indefinite useful life being reclassified as trademarks with a finite useful life.
As the Group’s trademarks that are classified as having an indefinite useful life are used internationally, they each contribute to all of the Group's cash-generating units.
2.6.2 Development costs
Costs incurred for the Group’s main development projects (relating to the design and testing of new or improved products) are recognized as intangible assets when it is probable that the project will be a success, considering its technical, commercial and technological feasibility, and costs can be measured reliably. Capitalized development costs are amortized from the starting date of the sale of the product on a straight-line basis over the period in which the asset’s future economic benefits are consumed, not exceeding 10 years.
Other development costs that do not meet the definition of an intangible asset are recorded in research and development costs for the year in which they are incurred.
2.6.3 Other intangible assets
Other intangible assets are recognized at cost less accumulated amortization and impairment. They include in particular:
• Software, which is generally purchased from an external supplier and amortized over three years.
2.6.4 Impairment tests on intangible assets except goodwill
When events or changes in market environment indicate that an intangible asset or item of property, plant and equipment may be impaired, the item concerned is tested for impairment to determine whether its carrying amount is greater than its recoverable amount, defined as the higher of fair value less costs to sell and value in use.
Fair value less costs to sell is the best estimate of the amount obtainable from the sale of an asset or cash-generating unit in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal.
Value in use is the present value of the future cash flows expected to be derived from the use and subsequent sale of the asset. For further information, see Note 2.7.2.
An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. Impairment losses on intangible assets may be reversed in subsequent periods if the impairment has decreased, provided that the increased carrying amount of the asset does not exceed the amount that would have been determined had no impairment loss been recognized.
Each trademark with an indefinite useful life is tested for impairment separately, in the fourth quarter of each year and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
Impairment tests are performed using the relief from royalty method. This method consists of measuring the royalties that the company would have to pay to license in the trademark from a third party. The theoretical value ot these royalties is then measured by estimating future revenue generated by the trademark over its useful life, as if the trademark were to be owned by a third party.This theoretical value is then compared to the trademark net book value.
2.7 Goodwill
2.7.1 Business combinations
For each combination, the Group decides to use:
i. Either the full goodwill method, which consists of allocating goodwill to minority interests. Under this method, goodwill is the difference between a) the consideration paid to acquire the business combination plus the fair value of the non-controlling interests in the combination and b) the fair value at date of acquisition of the identifiable net assets acquired and liabilities assumed.
The cost of business combinations, as determined on the date when control is acquired, corresponds to the fair value of the acquired entities. As such, it does not include acquisition-related costs and expenses but does include contingent consideration at fair value.
Changes in the percentage of interest held in a controlled entity are recorded directly in equity without recognizing any additional goodwill.
2.7.2 Impairment tests on goodwill
Goodwill is tested for impairment annually, in the fourth quarter of each year, and whenever events or changes in circumstance indicate that the carrying amount may not be recoverable.
For impairment testing purposes, goodwill is allocated to a cash-generating unit (CGU) or a group of CGUs, corresponding to the lowest level at which goodwill is monitored. Within the Legrand Group, CGUs are defined as corresponding to individual countries or to a group of countries, when they either have similar market characteristics or are managed as a single unit.
The need to record an impairment loss is assessed by comparing the carrying amount of the CGU’s assets and liabilities, including goodwill, and their recoverable amount, defined as the higher of fair value less costs to sell and value in use.
Value in use is estimated based on discounted cash flows for the next five years and a terminal value calculated from the final year of the projection period. The cash flow data used for the calculation is taken from the most recent medium-term business plans approved by Group management. Business plan projections are based on the latest available external forecasts of trends in the Group’s markets. Cash flows beyond the projection period of five years are estimated by applying a stable growth rate.
The discount rates applied derive from the capital asset pricing model. They are calculated for each individual country, based on financial market and/or valuation services firm data (average data over the last three years). The cost of debt used in the calculations is the same for all individual countries (being equal to the Group’s cost of debt).
Fair value less costs to sell is the best estimate of the amount obtainable from the sale of an asset or cash-generating unit in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal.
An impairment loss is recognized when the carrying amount is less than the recoverable amount. Impairment losses recognized on goodwill are irreversible.
2.8 Property, plant and equipment
Land, buildings, machinery and equipment, and other fixed assets are carried at cost less accumulated depreciation and any accumulated impairment losses. Impairment tests are performed annually and whenever events or changes in circumstances indicate that the assets’ carrying amount may not be recoverable.
the shorter of the lease contract period and the asset's useful life determined in accordance with Group policies (see below).
Depreciation is calculated on a straight-line basis over the estimated useful lives of the respective assets; the most commonly adopted useful lives are the following:
Light buildings ... 25 years Standard buildings ... 40 years Machinery and equipment ... 8 to 10 years Tooling... 5 years Office furniture and equipment ... 5 to 10 years
The depreciable amount of assets is determined after deducting their residual value when the amounts involved are material.
Each part of an item of property, plant and equipment with a useful life that is significantly different to the useful lives of other parts is depreciated separately.
Assets held for sale are measured at the lower of their carrying amount and fair value less costs to sell.
2.9 Inventories
Inventories are measured at the lower of cost (of acquisition or production) or net realizable value, with cost determined principally on a first-in, first-out (FIFO) basis. The production cost of finished goods and work in progress comprises raw materials, direct labor, other direct costs and related production overheads (based on normal operating capacity). It excludes borrowing costs. Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.
2.10 Deferred taxes
In accordance with IAS 12, deferred taxes are recognized for temporary differences between the tax bases of assets and liabilities and their carrying amount in the consolidated balance sheet. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset is realized or the liability is settled, based on tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.
Deferred tax assets and deferred tax liabilities are offset when the entity has a legally enforceable right of offset and they relate to income taxes levied by the same taxation authority.
2.11 Revenue recognition
neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; (iii) the amount of revenue can be measured reliably; (iv) it is probable that the economic benefits associated with the transaction will flow to the seller; and (v) the costs incurred or to be incurred in respect of the transaction can be measured reliably. For the Group, this policy results in the recognition of revenue when ownership title and the risk of loss are transferred to the buyer, which is generally upon shipment.
The Group offers some sales incentives to customers, consisting primarily of volume rebates and cash discounts. Volume rebates are typically based on three, six, and twelve-month arrangements with customers, and rarely extend beyond one year. Based on the trade of the current period, such rebates are recognized on a monthly basis as a reduction in revenue from the underlying transactions that reflect progress by the customer towards earning the rebate, with a corresponding deduction from the customer’s trade receivables balance.
2.12 Valuation of financial instruments 2.12.1 Hierarchical classification of financial instruments
Under the amended IFRS 7, financial instruments are classified in a three-level hierarchy based on the inputs used to measure their fair value, as follows:
•••• Level 1: quoted prices for similar instruments;
•••• Level 2: directly observable market inputs other than level 1 inputs; •••• Level 3: inputs not based on observable market data.
2.12.2 Measurement of financial instruments
The carrying amounts of cash, short-term deposits, accounts receivable, accounts payable, accrued expenses and short-term borrowings approximate their fair value because of these instruments’ short maturities. For short-term investments, comprised of marketable securities, fair value corresponds to the securities’ market price. The fair value of long-term borrowings is estimated on the basis of interest rates currently available for issuance of debt with similar terms and remaining maturities. The fair value of interest rate swap agreements is the estimated amount that the counterparty would receive or pay to terminate the agreements, and is calculated as the present value of the estimated future cash flows.
2.12.3 Non-derivative financial instruments designated as hedges
Under IAS 39, non-derivative financial instruments may be designated as hedges only when they are used to hedge foreign currency risk and provided that they qualify for hedge accounting.
2.12.4 Derivatives
Group policy consists of not entering into any transactions of a speculative nature involving financial instruments. All transactions in these instruments are entered into exclusively for the purpose of managing or hedging currency or interest rate risks, and changes in the prices of raw materials. For this purpose, the Group periodically enters into contracts such as swaps, caps, options, futures and forward contracts, according to the nature of its exposure.
Accounting treatment of derivative instruments
Derivatives are initially recognized at fair value at the contract inception date and are subsequently remeasured at fair value at each reporting date. The method of recognizing the resulting gain or loss depends on whether the derivative qualifies for hedge accounting, and if so, the nature of the item being hedged.
Put on non-controlling interests
In the particular case of puts written on non-controlling interests without any transfer of risks and benefits, the contractual obligation to purchase these equity instruments is recognized as a liability by adjusting equity in application of IAS 32. Any subsequent changes in the liability are recorded in equity.
Other derivative instruments
In the case of other derivative instruments, the Group analyzes the substance of each transaction and recognizes any changes in fair value in accordance with IAS 39.
The fair values of derivative instruments used for hedging purposes are disclosed in Note 22.
2.13 Environmental and product liabilities
In accordance with IAS 37, the Group recognizes losses and accrues liabilities relating to environmental and product liability matters. A loss is recognized if available information indicates that it is probable and reasonably estimable. In the event that a loss is neither probable nor reasonably estimable but remains possible, the contingency is disclosed in the notes to the consolidated financial statements.
Losses arising from environmental liabilities are measured on a best-estimate basis, case by case, based on available information.
Losses arising from product liability issues are estimated on the basis of current facts and circumstances, past experience, the number of claims and the expected cost of administering, defending and, in some cases, settling such cases.
In accordance with IFRIC 6 - Liabilities arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment, the Group manages waste equipment under the European Union Directive on waste electrical and electronic equipment by paying financial contributions to a recycling platform.
2.14 Share-based payment transactions
2.14.1 Equity-settled share-based payment transactions
The cost of stock options or performance shares is measured at the fair value of the award on the grant date, using the Black & Scholes option pricing model or the binomial model, and is recognized in the income statement under “Employee benefits expense” on a straight-line basis over the vesting period with a corresponding adjustment to equity. Changes in the fair value of stock options after the grant date are not taken into account.
The expense recognized by crediting equity is adjusted at each period-end during the vesting period to take into account changes in the number of shares that are expected to be delivered to employees when the performance shares vest or the stock options are exercised.
2.14.2 Cash-settled share-based payment transactions
When granting long-term employee benefits plans indexed to the share price, the value of the awarded instruments is estimated according to the conditions defined at the plan’s inception. This value is remeasured at each period-end and the resulting increase or decrease in expense is recognized as an adjustment to provisions.
2.15 Transfers and use of financial assets
In accordance with IAS 39, financial assets are derecognized when the associated cash flows and substantially all the related risks and rewards have been transferred.
2.16 Pension and other post employment benefit obligations 2.16.1 Pension obligations
Group companies operate various pension plans. The plans are funded through payments to insurance companies or trustee-administered funds, determined by periodic actuarial calculations. The Group has both defined contribution and defined benefit plans.
Defined contribution plans
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. Contributions are recognized as an expense for the period of payment.
The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in current and prior periods.
Defined benefit plans
A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and end-of-career salary.
The Group recognizes all actuarial gains and losses outside profit or loss, in the Statement Of Recognized Income and Expense (Statement of comprehensive income), as allowed under IAS 19, paragraph 120C (revised).
Defined benefit obligations are calculated using the projected unit credit method. This method takes into account estimated years of service at retirement, final salaries, life expectancy and staff turnover, based on actuarial assumptions. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of investment grade corporate bonds that are denominated in the currency in which the benefits will be paid and have terms to maturity approximating the period to payment of the related pension liability.
2.16.2 Other post-employment benefit obligations
Some Group companies provide post-employment healthcare benefits to their retirees. The entitlement to these benefits is usually conditional on the employee remaining with the company up to retirement age and completion of a minimum service period.
The benefits are treated as post-employment benefits under the defined benefit scheme.
2.16.3 Other long-term employee benefits
The Group has implemented plans providing long-term employee benefits to employees, which are recognized in provisions in accordance with IAS 19.
2.17 Segment information
The Group is organized for management purposes by country and by geographical segment.
Hence, allocation of resources to the various segments and assessement of each segment's performance are performed by the Group management on a country basis.
2.18 Basic and diluted earnings per share
Basic earnings per share are calculated by dividing net profit attributable to equity holders of Legrand by the weighted number of ordinary shares outstanding during the period.
Diluted earnings per share are calculated according to the treasury stock method, by dividing profit attributable to equity holders of Legrand by the weighted average number of ordinary shares outstanding during the period, plus the number of dilutive potential ordinary shares.
2.19 Short- and long-term borrowings
Short- and long-term borrowings mainly comprise bonds and bank loans. They are initially recognized at fair value, taking into account any transaction costs directly attributable to the issue, and are subsequently measured at amortized cost, using the effective interest method.
2.20 Borrowing costs
In accordance with the revised version of IAS 23, borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are included in the cost of that asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale.
Other borrowing costs are recognized as an expense for the period in which they were incurred.
2.21 Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that are reflected in the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.
Estimates and judgments are continually evaluated. They are based on historical experience and other factors, including expectations of future events, and are believed to be reasonable under the circumstances.
2.21.1 Impairment of goodwill and intangible assets
Trademarks with indefinite useful lives and goodwill are tested for impairment at least once a year and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, in accordance with the accounting policies presented in Notes 2.6.4 and 2.7.2.
Intangible assets with finite useful lives are amortized over their estimated useful lives and are tested for impairment when there is any indication that their recoverable amount may be less than their carrying amount.
Future events could cause the Group to conclude that evidence exists that certain intangible assets acquired in a business combination are impaired. Any resulting impairment loss could have a material adverse effect on the Group’s consolidated financial condition and results of operations.
The discounted cash flow estimates used for impairment tests on goodwill and trademarks with indefinite useful lives are based to a significant extent on management’s judgment.
2.21.2 Accounting for income taxes
expenses for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are reported in the consolidated balance sheet.
The Group must then assess the probability that deferred tax assets will be recovered from future taxable profit. Deferred tax assets are recognized only when it is probable that sufficient taxable profit will be available, based on management-approved taxable profit forecasts.
The Group has not recognized all of its deferred tax assets because it is not probable that some of them will be recovered before they expire. The amounts involved mainly concern operating losses carried forward and foreign income tax credits. The assessment is based on estimates of future taxable profit by jurisdiction in which the Group operates and the period over which the deferred tax assets are recoverable.
2.21.3 Other assets and liabilities based on estimates
Other assets and liabilities based on estimates include provisions for pensions and other post-employment benefits, impairment of trade receivables, inventories and financial assets, stock options, provisions for contingencies and charges, capitalized development costs, and any annual volume rebates offered to customers.
Note 3 - Changes in the scope of consolidation
The contributions to the Group’s consolidated financial statements of companies acquired since January 1, 2012 were as follows:
2012 March 31 June 30 September 30 December 31
Megapower 3 months’ profit 6 months’ profit 9 months’ profit 12 months’ profit Aegide Balance sheet only 4 months’ profit 7 months’ profit 10 months’ profit
Numeric UPS Balance sheet only 4 months’ profit 7 months’ profit
NuVo Technologies Balance sheet only
2013 March 31 June 30 September 30 December 31
Aegide 3 months’ profit 6 months’ profit 9 months’ profit 12 months’ profit
Numeric UPS 3 months’ profit 6 months’ profit 9 months’ profit 12 months’ profit NuVo Technologies 3 months’ profit 6 months’ profit 9 months’ profit 12 months’ profit Daneva Balance sheet only 6 months’ profit 9 months’ profit 12 months’ profit Seico Balance sheet only 5 months’ profit 8 months’ profit 11 months’ profit
S2S Balance sheet only Balance sheet only 8 months’ profit
Adlec Power Balance sheet only 5 months’ profit
Tynetec Balance sheet only 5 months’ profit
The main acquisitions carried out in 2013 were as follows:
- The acquisition of 51% of Daneva was completed after approval from the local competition authorities, with an option to take full control from April 2014. Daneva reported revenue of around €27 million in 2012.
- The Group acquired Seico, the Saudi market leader in industrial metal cable trays. Seico reported around €23 million in revenue in 2012.
- The Group acquired S2S, a French uninterruptible power supply company with more than €20 million in revenue in 2012.
- The Group acquired a majority stake in Adlec Power, one of the major Indian manufacturers of switchboards. It acquired 70% of the shares with an option to take full control from July 2018. Based in the region of Delhi, Adlec Power has annual sales of approximately €23 million.
- The Group acquired Tynetec, a frontrunner in systems dedicated to assisted living in United Kingdom with annual sales over €15 million.
In all, acquisitions of subsidiaries (net of cash acquired), minority interests and shares in non-consolidated entities came to a total of €133.4 million in 2013, versus €196.0 million in 2012. Of this, acquisitions of subsidiaries (net of cash acquired) accounted for €131.7 million in 2013, compared with €187.9 million in 2012.
Note 4 - Intangible assets (Note 2.6)
Intangible assets are as follows:
(in € millions)
December 31, 2013
December 31, 2012
Trademarks with indefinite useful lives 1,408.0 1,408.0
Trademarks with finite useful lives 237.0 236.3
Developed technology 3.9 5.5
Other intangible assets 172.2 173.7
1,821.1 1,823.5
The Legrand and Bticino brands represent close to 98% of the total value of trademarks with indefinite useful lives.
Trademarks can be analyzed as follows:
(in € millions)
December 31, 2013
December 31, 2012
At the beginning of the period 1,749.3 1,686.6
- Acquisitions 41.4 70.6
- Adjustments 0.0 0.0
- Disposals 0.0 0.0
- Translation adjustments (25.2) (7.9)
1,765.5 1,749.3
Less accumulated amortization and impairment (120.5) (105.0)
To date, no impairment has been recognized for these trademarks.
Trademarks with indefinite useful lives are tested for impairment annually and whenever events or changes in circumstances indicate that their carrying amount may exceed their recoverable amount.
The following impairment testing parameters were used in the period ended December 31, 2013:
No impairment was recognized in the period ended December 31, 2013.
Sensitivity tests were performed on the discount rates and long-term growth rates used for impairment testing purposes. Based on the results of these tests, a 50-basis point change in these rates would not lead to any impairment losses being recognized on trademarks with an indefinite useful life.
The following impairment testing parameters were used in the period ended December 31, 2012:
No impairment was recognized in the period ended December 31, 2012.
Developed technology can be analyzed as follows:
(in € millions)
December 31, 2013
December 31, 2012
At the beginning of the period 582.0 576.8
- Acquisitions 0.0 7.0
- Disposals 0.0 0.0
- Translation adjustments (3.3) (1.8)
578.7 582.0
Less accumulated amortization and impairment (574.8) (576.5)
At the end of the period 3.9 5.5
To date, no impairment has been recognized for these items.
Other intangible assets can be analyzed as follows:
(in € millions)
December 31, 2013
December 31, 2012
Capitalized development costs 260.0 232.8
Software 95.0 93.1
Other 76.1 72.3
431.1 398.2
Less accumulated amortization and impairment (258.9) (224.5)
At the end of the period 172.2 173.7
To date, no impairment has been recognized for these items.
Amortization and impairment expense related to other intangible assets amounted to €45.3 million in 2013, of which €27.7 million concerned capitalized developed technology and €11.3 million software.
Amortization and impairment expense related to other intangible assets amounted to €41.1 million in 2012, of which €24.2 million concerned capitalized developed technology and €11.4 million software.
Amortization expense for trademarks and developed technology for each of the next five years is expected to be as follows: (in € millions) Developed technology Trademarks Total 2014 0.7 20.7 21.4 2015 0.7 20.7 21.4 2016 0.7 20.7 21.4 2017 0.7 20.7 21.4 2018 0.7 20.7 21.4
Note 5 - Goodwill (Note 2.7)
Goodwill can be analyzed as follows:
(in € millions) December 31, 2013 December 31, 2012 France 675.8 640.5 Italy 366.8 366.8 Rest of Europe 271.8 280.2 USA/Canada 404.1 420.8
Rest of the World 693.2 746.9
2,411.7 2,455.2
In the “Rest of Europe” and “Rest of the World” regions, no final amount of goodwill allocated to a cash-generating unit (CGU) represents more than 10% of total goodwill.
Changes in goodwill can be analyzed as follows:
(in € millions)
December 31, 2013
December 31, 2012
Gross value at the beginning of the period 2,493.3 2,440.9
- Acquisitions 108.8 145.5
- Adjustments (42.4) (65.2)
- Translation adjustments (112.2) (27.9)
Gross value at the end of the period 2,447.5 2,493.3
Impairment value at the beginning of the period (38.1) (37.4)
- Impairment losses 0.0 0.0
- Translation adjustments 2.3 (0.7)
Impairment value at the end of the period (35.8) (38.1)
Net value at the end of the period 2,411.7 2,455.2
Adjustments correspond to the difference between provisional and final goodwill.
For impairment testing purposes, goodwill has been allocated to various countries, grouping CGUs which represent the lowest level at which goodwill is monitored. France, Italy and USA/Canada are each considered to be a single CGU, whereas the Rest of Europe and Rest of the World segments are made up of several CGUs.
These CGUs are tested for impairment annually, and whenever events or changes in circumstances indicate that their value may be impaired, by comparing their carrying amount, including goodwill, to their value in use.
Value in use corresponds to the present value of the future cash flows expected to be derived from the subsidiaries included in the cash-generating unit. As required by IAS 36, it is calculated by applying tax discount rates to pre-tax future cash flows.
Goodwill arising on partial acquisitions has been measured using the partial goodwill method (Note 2.7.1).
Goodwill is tested for impairment annually and whenever events or changes in circumstances indicate that its carrying amount may exceed its recoverable amount.
The following impairment testing parameters were used in the period ended December 31, 2013:
Value in use Recoverable amount Carrying amount of goodwill Discount rate (before tax) Growth rate to perpetuity France 675.8 10.5% 2% Italy 366.8 15.4% 2%
Rest of Europe Value in use 271.8 8.7 to 20.4% 2 to 5%
USA/Canada 404.1 10.5% 3%
Rest of the World 693.2 10.3 to 18.6% 2 to 5%
No goodwill impairment losses were identified in the period ended December 31, 2013.
Sensitivity tests performed on the discount rates, long-term growth rates and operating margin rates showed that a 50 basis point unfavorable change in each of these three parameters would not lead to any material impairment of goodwill on an individual basis for each CGU.
The following impairment testing parameters were used in the period ended December 31, 2012:
Value in use Recoverable amount Carrying amount of goodwill Discount rate (before tax) Growth rate to perpetuity France 640.5 10.5% 2% Italy 366.8 15.9% 2%
Rest of Europe Value in use 280.2 9.4 to 18.7% 2 to 5%
USA/Canada 420.8 10.8% 3%
Rest of the World 746.9 11.8 to 20.9% 2 to 5%
2,455.2
No goodwill impairment losses were identified in the period ended December 31, 2012.
For business combinations, the fair values of the identifiable assets acquired and liabilities and contingent liabilities assumed are determined on a provisional basis. As a result, the related goodwill is subject to adjustment during the year following the provisional allocation.
Acquisition prices for the twelve months ended December 31, 2013 and December 31, 2012 have been allocated as follows: 12 months ended (in € millions) December 31, 2013 December 31, 2012 - Trademarks 41.4 70.6
- Deferred taxes on trademarks (3.4) (10.1)
- Developed technology 0.0 7.0
- Deferred taxes on developed technology 0.0 (2.4)
- Other intangible assets 7.2 4.9
- Deferred taxes on other intangible assets 0.0 (1.2)
Note 6 - Property, plant and equipment (Note 2.8)
6.1 Analysis of changes in property, plant and equipment Changes in property, plant and equipment in 2013 can be analyzed as follows:
December 31 , 2013 (in € millions) Land Buildings Machinery and equipment Assets under construction
and other Total
Gross value
At the beginning of the period 56.2 579.3 1,602.4 291.4 2,529.3
Acquisitions 0.0 9.7 41.3 44.4 95.4
Disposals (0.7) (10.4) (40.6) (16.2) (67.9)
Transfers and changes in scope of
consolidation 0.2 11.6 55.2 (41.1) 25.9
Translation adjustments (1.5) (10.2) (37.1) (11.7) (60.5)
At the end of the period 54.2 580.0 1,621.2 266.8 2,522.2
Depreciation and impairment
At the beginning of the period (8.2) (354.5) (1,375.9) (214.1) (1,952.7)
Depreciation expense (0.6) (19.0) (68.7) (13.2) (101.5)
Reversals 0.7 9.6 39.5 14.9 64.7
Transfers and changes in scope of
consolidation 0.0 (3.7) (24.2) 16.6 (11.3)
Translation adjustments 0.0 4.9 26.5 7.8 39.2
At the end of the period (8.1) (362.7) (1,402.8) (188.0) (1,961.6)
Net value
At the beginning of the period 48.0 224.8 226.5 77.3 576.6
Acquisitions / Depreciation (0.6) (9.3) (27.4) 31.2 (6.1)
Disposals / Reversals 0.0 (0.8) (1.1) (1.3) (3.2)
Transfers and changes in scope of
consolidation 0.2 7.9 31.0 (24.5) 14.6
Translation adjustments (1.5) (5.3) (10.6) (3.9) (21.3)
At the end of the period 46.1 217.3 218.4 78.8 560.6
Changes in property, plant and equipment in 2012 can be analyzed as follows: December 31 , 2012 (in € millions) Land Buildings Machinery and equipment Assets under construction
and other Total
Gross value
At the beginning of the period 55.9 574.8 1,612.1 291.7 2,534.5
Acquisitions 0.0 3.5 35.1 43.3 81.9
Disposals 0.0 (10.2) (64.7) (15.4) (90.3)
Transfers and changes in scope of
consolidation 0.5 12.0 24.2 (27.7) 9.0
Translation adjustments (0.2) (0.8) (4.3) (0.5) (5.8)
At the end of the period 56.2 579.3 1,602.4 291.4 2,529.3
Depreciation and impairment
At the beginning of the period (7.6) (341.9) (1,366.4) (212.7) (1,928.6)
Depreciation expense (0.6) (20.6) (70.9) (13.1) (105.2)
Reversals 0.0 7.9 63.7 13.8 85.4
Transfers and changes in scope of
consolidation 0.0 (0.2) (4.5) (1.9) (6.6)
Translation adjustments 0.0 0.3 2.2 (0.2) 2.3
At the end of the period (8.2) (354.5) (1,375.9) (214.1) (1,952.7)
Net value
At the beginning of the period 48.3 232.9 245.7 79.0 605.9
Acquisitions / Depreciation (0.6) (17.1) (35.8) 30.2 (23.3)
Disposals / Reversals 0.0 (2.3) (1.0) (1.6) (4.9)
Transfers and changes in scope of
consolidation 0.5 11.8 19.7 (29.6) 2.4
Translation adjustments (0.2) (0.5) (2.1) (0.7) (3.5)
At the end of the period 48.0 224.8 226.5 77.3 576.6
6.2 Property, plant and equipment include the following assets held under finance leases: (in € millions) December 31, 2013 December 31, 2012 Land 2.3 2.3 Buildings 36.1 36.2
Machinery and equipment 31.4 31.5
69.8 70.0
Less accumulated depreciation (39.7) (38.9)
30.1 31.1
6.3 Finance lease liabilities are presented in the balance sheets as follows:
6.4 Future minimum lease payments under finance leases are as follows: (in € millions) December 31, 2013 December 31, 2012
Due in less than one year 1.5 2.4
Due in one to two years 1.5 1.6
Due in two to three years 1.4 1.5
Due in three to four years 1.3 1.5
Due in four to five years 1.3 1.5
Due beyond five years 7.4 9.3
14.4 17.8
Of which accrued interest (0.7) (1.9)
Net present value of future minimum lease
payments 13.7 15.9
Note 7 - Inventories (Note 2.9)
Inventories are as follows:
(in € millions)
December 31, 2013
December 31, 2012
Purchased raw materials and components 231.7 231.8
Sub-assemblies, work in progress 90.8 92.5
Finished products 403.4 386.0
725.9 710.3
Less impairment (105.0) (110.5)
620.9 599.8
Note 8 - Trade receivables (Note 2.5)
In 2013, the Group derived over 95% of its revenue from sales to distributors of electrical equipment. The two largest distributors accounted for approximately 23% of consolidated net revenue and no other distributor accounted for more than 5% of consolidated net revenue.
(in € millions)
December 31, 2013
December 31, 2012
Trade accounts and notes receivable 538.7 552.6
Less impairment (64.4) (62.0)
